Transforming the Net Present Value for a Comparable One
Keywords:
business economics, capital budgeting decisions, net present value, internal rate of return, ranking, economic efficiencyAbstract
This study examines the nature of net present value. It defines the economic content of the net present value and mathematically
proves that definition is correct. This economic content inducts that the net present values are not comparable. The study
systematically eliminates the distortion affects. The net present value transforms into a special kind of rate, namely, the modified
difference between the factual and the required rate of return. The ranking list according to this transformed net present value
corresponds to the list according to the internal rate of return. This is a new cognition and a very important correspondence.
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